June 17th, 2006

Increasing Advertising’s Low Return on Consumer Attention

by

Search advertising was revolutionary because it created a new science of ad relevance — the old targeting tools of demographics and psychographics seem like a shot in the dark by comparison. On the face of it, the value proposition of search advertising makes perfect sense — ads are chosen based on key word relevance — a consumer is searching for something, and search advertising delivers ads with produce/service offerings related to that search.

But despite this huge innovation, search advertising still provides a relatively low return on consumer attention — in ad brokering systems like Google AdWords, which are based on auctions, relevance is often in conflict with revenue per click. AdWords must balance the likelihood of a click — and its correlation with relevance — against the amount of revenue Google receives for that click. And advertisers who win the key word game can direct consumers to sites that may not be fully relevant to the actual intent of their searches.

Let’s look at a specific example. I’m thinking about buying a video camera, but I don’t want to spend too much. So I Google “best inexpensive digital video camera” (I may be cheap, but I still want the best I can get):

Google Video Camera Search

So now I have two options:

1. Explore the “organic” results for reviews to help me choose which camera to buy
2. Explore the “sponsored links,” i.e. the ads

The headlines of the sponsored links sound good — “Best Video Camera,” “Inexpensive Video Camera” — but if you try the search and click on any of the links, you’ll find that there’s no way to know whether you’re getting the “best” or the most “inexpensive” video camera.

What I’m getting is not the “best inexpensive digital video camera” but rather offers from the best gamers of the AdWords system with the deepest pockets.

But here’s the bigger problem: In my search for the video camera that I will ultimately purchase, money will change hands between advertisers and intermediaries as my attention — and my intention to buy — is “monetized.” But not a dime of that ad money will make it into my pocket.

It’s MY attention, MY intention, and MY purchase — Google and other intermediaries will make all the money, and I won’t see a dime.

In a previous meditation on this problem I wrote:

Imagine a Robin-Hood-like application that could somehow take a percentage of the revenue that we generate through our attention and redistribute it to us. Imagine if Google had to pay YOU for the attention that you give each AdWords advertiser when you click.

JellyfishThe other day I spoke to Brian Wiegand and Mark McGuire, who have dreamed up just such an application, which they call Jellyfish (more transparency, etc.). Here’s how Mark describes it in the Jellyfish blog:

I think we will soon reach a tipping point where consumers are going to realize that when it comes to their buying intentions, search intermediaries like Google/Yahoo/MSN (and a host of vertical engines) are keeping too much value for themselves (advertising $’s) without delivering a corresponding increase of value to the consumers participating in this system.

At Jellyfish, we want to be this tipping point. We think the way to do so is to fix the underlying advertising model to align the incentives of all three parties involved in a sale (buyer, seller and intermediary). The advertising market does a good job of maximizing the value your intention (GYM have PPC auctions that do this everyday); it just hasn’t done such a good job of fairly allocating that value among the key stakeholders. In our marketplace, we plan to allow the existing advertising system to set a value on your intent to buy, but that value (e.g., your intention currency) will flow to you, to the advertiser, and to us only when we do a good job of using that intent (and your historical buying intentions) to connect you to the product or service that is right for you. This will happen seamlessly and without you even thinking about it in terms of driving a maximum return on your buying intention. In the transparent marketplace at Jellyfish, advertising will transform into intention currency and that currency will be used to efficiently match buyers and sellers.

And this is the way we think the attention economy will start to catch on for the masses: By integrating its core concepts into an easy to use application that has direct, tangible benefits to the end consumer and advertiser alike. The average consumer may not think about it as intention currency, but we hope the increased value to that consumer will ensure that she continues to come back each time she has intent to buy something online as opposed to just an intent to search for information.

Brian and Mark shared with me the details of how Jellyfish works, which got me more jazzed than I’ve been in a while about the prospect of some game changing evolution. I promised not to disclose the details pre-launch, but that should happen any day now, and I’m eager to delve in once they’re live.

The folks at AttentionTrust have of course been all over the return on attention issue — in fact, they have an interview with Mark.

What we need to really change the attention game — and to dramatically increase advertising’s return on consumer attention — is a way for AVERAGE PEOPLE to increase their skin in the game “seamlessly and without you even thinking about it.” We’ll soon see whether Jellyfish can seize this opportunity.

Comments (27 Responses so far)

  1. Increasing Advertising’s Low Return on Consumer Attention

  2. “Increasing Advertising’s Low Return on Consumer Attention”. On the face of it, the value proposition of search advertising makes perfect sense — ads are chosen based on key word relevance — a consumer is searching for something, and search advertising delivers ads with produce/service offerings related to

  3. Scott Karptalked with the guys at Jellyfish the other day, and whatever they told him caught his interest: What we need to really change the attention game — and to dramatically increase advertising’s return on consumer attention — is a way for

  4. GDrive かもしれない、とのことらしい。 しかし一番面白そうだったのは、Increasing Advertising’s Low Return on Consumer Attention で、Google AdSense の次に来る広告モデルを Attention Economy と絡めて模索する話。Buyer(消費者), Seller(販売者), Intermediary(広告業者) の三つのパーティを考えたとき、現状では Seller と Intermediary

  5. a double edged sword as Google needed the funds to grow and selling ads was the best and most profitable way to compete. Publisher 2.com author Scott Karp agrees with Page and Brin’s sentiments and comments about it on this in his latest blog post.http://publishing2.com/2006/06/17/increasing-advertisings-low-return-on-consumer-attention/ . He comments that although the ads are seen by thousands of people they have a very low rate of return. I for one have only clicked on organic searches in Google. In fact, knowing the banner and right hand column are indeed paid ads makes me weary

  6. Publishing 2.0 » Increasing Advertising\0s Low …

  7. so sellers can pay you to buy it from them..like a coupon? only easier? kinda?

  8. Potentially a stupid question, (esp. given that Root Markets is a client of Stamen’s and I’m actively working on Attention-related stuff) but:

    Given that all the money in question ultimately comes from consumers, how would it help to share it back to consumers? If Joe Searcher received a percentage of the dime paid to Google by Product Co., then either Google would receive less than they do now, or Product Co. would pay more. Either way, I can see this extra cost flowing back to Product Co.’s customers in the form of higher prices.

    My own interest here is *emphatically not* in seeing a piece of Google’s dime. It’s in exploring ways that better-targetted, intention-based advertising can cleanse my environment of useless garbage. It’s a win for ProductCo. (an answer to the which-half-is-wasted problem in advertising), a win for Google (whose ad space hypotetically becomes more valuable), but mostly it’s a win for me because I see less crap.

  9. Jim, I don’t think “a coupon only easier” really captures it, but that would certainly be an improvement over the current system.

    Michal, I think “Google would receive less” is a key element. The costs of advertising are already passed on to the consumer — right now the advantage goes to the company that allocates the most money from the value chain to the intermediary, e.g. Google. Shouldn’t the advantage go to the company that allocates the greatest value to the consumer?

    Cleaning out useless garbage is an entirely separate although very real issue. This is about creating more return on intention for consumers considering competing offers that are all more or less relevant.

    I personally would love to have a piece of Google’s dime — it’s a BIG dime.

  10. Scott: I wonder whether Google really would charge less. If their targeting were any good, they should be able to charge a more for individual adwords. Unfortunately, they’re run by secretive mathematician-priests who hate the thought of making stats about AdSense public. This seems to be Root & AttentionTrust’s opening, as I see it: establish a standard of exchange for these sorts of leads, and the market will ultimately be more efficient, leading to fewer aggregate costs to pass on to consumers. Google’s opacity would be their weak spot in an open exchange.

    On the useless garbage topic, I think it is a related issue, in the sense that less garbage is a kind of value, just not expressed financially. Google ate the search market alive in a hurry primarily on this strength, and generated a large amount of (now-eroding?) goodwill.

  11. ‘Shouldn’t the advantage go to the company that allocates the greatest value to the consumer?’

    Seems like Google is already establishing a great foundation there. Adwords sales tracking, Analytics.. now Gbuy. All initiatives to capture information on the actual sale so they can funnel it back into ad targeting.

  12. Yeah, Jellyfish is a great idea – can’t wait for it to go live.

  13. I did an extensive (internal) analysis of biz models like these and came to the conclusion that they don’t work in the long run because of monetary-identity imbalances and the resulting cheating. Like the pay-to-surf, cybergold, and mypoints model of the late 90s paying people to view ads is an underwhelming experience for both the consumer and the advertiser whileopen to a ton of abuse.

    Though advertising in the US is a $250+ billion industry, it amounts to less than $1000 per individual a year. However, advertisers don’t spend their money equally on every potential customer. Some groups (think the affluent, celebrities, CEOs) would deserve to be lavished with thousands of advertising dollars, but yet these individuals are the least likely to be influenced/bribed by a fistful of cash since they have plenty already. On the opposite side of the scale, the poor and non-influencers, who most need the extra cash, would be shunned by advertisers or given a pittance because they lack the ability to pay for the products advertisers sell. The only exception would be for kids and young adults who are currently money-poor, but either have family wealth or are on a career path to affluence (ie, a medical intern).

    The matrix is as follows:
    affluent: time-limited/money-abundance
    poor: time-abundant/money-limited

    Moreover, the “pay per (ad) view” system is ripe for abuse. Since advertisers will most likely discriminate how much they pay a person based on the demographic info they give someone like Jellyfish don’t be surprised if everyone lists their household income at $150K+ and their zipcode as 90210. If advertisers them decide to pay only a flat rate, don’t be suprised when the truly well-off abandon the system as a waste of time given its return (maybe a couple $100/yr max.) while hordes of newcomers with IP addresses from China and India become veritable regulars. Of course, if the intermediary tries to ban them, they’ll just IP mask their addresses and hijack legitimate accounts.

    If you want to know what will unfold, just examine what has happened to MMOGs when their virtual currencies could be turned into real cash. A ton of mostly foreign players do nothing but gold-farm, debasing the virtual currency, and creating havok for the legitimate players.

    In the short run the model may work, but in the long run it will implode.

    PS: by affluent I don’t just mean the rich, but those whose HH incomes are $50K+

  14. Brian, you’re right about the potential for abuse — just look at AdWords — but what the guys at Jellyfish have cooked up is not a “pay per view” system based on demographics as you describe.

    As for concluding through “analysis” that such systems can’t work, that’s a sticky wicket — a lot of people at Google thought AdWords/AdSense wouldn’t work. You never know until you try.

  15. Scott,

    The only other system I can think of that does what Jellyfish is describing is a rebate model similar to FatWallet. That model “pays you” back a percentage or fixed amount based on completing a transaction. If that is what Jellyfish is describing then it is not revolutionary.

  16. or if all jellyfish adds is to illuminate how much said advertiser pays for the paid ad, then it is no different the early version of goto.com (acquired by yahoo).

  17. Brian, I emphatically agree with you that all of the failed late 90’s business models where people were paid to view ads didn’t work. That is not what we are doing.
    I would love to get your feedback once we launch but, I think you will immediately notice that our new ad model is different than the ones that you have mentioned in your posts above.

    I am of the belief whether rich or poor that I would rather pay $85 for something than $100 regardless of my demographic as long as convenience and relevance were part of the equation.

    The current PPC ad models do a great job with convenience and relevance but my question is that enough for MY attention in today’s information rich economy? What if there was another option that was as convenient and relevant but added something extra to the equation?

  18. Great posts by all. I think Scott is finally honing in on the right issue here with advertisers and content and how it will be paid for.

    I agree that the payback to the consumer is in producing better search results and the better likelihood of getting the most inexpensive camera (in this example). Paying them a tiny amount of money for their attention is really hard to pull off and get good results.

    The only way to make a system work that I can think of to actually compensate people for their attention is a mass-edited ranking system for reviewers of products. But even that is subject to abuse. Almost all ranking systems could be rigged.

    The rebate idea (from Google?) for an actual purchase seems promising. That might get Google interested in providing truly the best links, as their profits would be tied to satisfying the customer’s search desires.

    We have to get the riff-raff out of the system. And then perhaps people will trust the ad links and the reviews they see. And how do we do that? That should be the key question.

  19. [...] Over at Publishing 2.0, Scott comments on a start-up called Jellyfish that plans to remake the search-marketing business by reallocating some of the revenues to the consumer because, hey, it’s the consumer’s attention that is being monetised. He cites the Jellyfish blog: [...]

  20. Scott,

    Profiling companies without telling us how their product actually works is simply adding to the generic Web 2.0 hype. If you are going to profile a company, please either give enough details about their business model for your readers to make a reasonable assesment, or leave it until the public announcement.

    By the way, your analysis of Adwords is wrong.

    What I’m getting is not the “best inexpensive digital video camera” but rather offers from the best gamers of the AdWords system with the deepest pockets.

    But here’s the bigger problem: In my search for the video camera that I will ultimately purchase, money will change hands between advertisers and intermediaries as my attention — and my intention to buy — is “monetized.” But not a dime of that ad money will make it into my pocket.

    Where does the money in those “deep pockets” come from? The company that has the most efficient production and distribution will have the most money left over for advertising. The reward for efficiency is more advertising, and more sales. This leads to economy-of-scale which drives prices down across the whole industry.

    As a consumer, you benefit from ad competition by vendors in two ways 1) lower prices and 2) less time to take a decision. (Advertising is communication, and if a company can communicate its benefits more quickly, then that is a major benefit to the consumer.)

  21. Mark,

    First, I wasn’t profiling the Jellyfish so much as their philosophy, which is why quoted from their blog — I think their ideas and their philosophy have merit on their own, regardless of how well they execute. Much of what I do on this blog is talk about ideas. Besides, ever TechCrunch sometimes does posts without specifics, such as the profile of Yahoo’s Hack Day — it’s Yahoo’s philosophy of quick innovation that was being profiled, not the specific ideas.

    Second, as to your economic analysis, you’re assuming that the traditional advertising model, where all of the economic value accrues to the intermediary, and where there is a huge amount of waste in irrelevant message delivery, is in fact the most efficient way to drive sales. You’re also assuming that plowing profits into more advertising is the most efficient way to create more value for customers, which is what ultimately drives sales. I can’t comment on your last paragraph because I don’t really understand what you’re saying there.

  22. Whatever their philosophy is, it means little without actual details of how their site actually works. This is especially true when they claim to overturn existing advertisng models with their system. So many sites have had great ideas, but have failed when the product actually reached market. The road to hell is paved with good intentions ;)

    You have misread my analysis. I did not say that all value accrues to the intermediary. I said the oppposite. Consumers receive direct benefits when corporations compete to advertise to them.

    The first benefit to consumers is that competition between advertisers drives prices down, and rewards more efficient companies. The second benefit is that competition to create better advertising messages ultimately saves consumers time.

  23. Mark,

    When you do a search on Google, how is competition among advertisers that appear on the results page driving down prices for consumers? Prices typically aren’t even listed in AdWords ads.

    How can you possible argue that all of the irrelevant advertising message I’m being bombarded with all day long is actually saving me time? It’s a massive waste of time. Even AdWords with all its claim to “relevancy” still bombards me with irrelevant messages.

    How about some concrete examples of how this works?

  24. First of all advertising media provides space for companies to compete against each other on price and benefits. If one advertiser offers a candy bar for $1.00 and another offers a candy bar for $0.90 consumers will usually buy the cheaper one. If two items are equivalently priced, then the company that can present its benefits to its market will win the sale. Without a marketplaces consumers are not aware of pricing and benefits.

    Competition reduces prices. For example, due to efficient manufacturing methods, Company A makes a candy bar for $0.90, while Company B makes an equivalent bar for $1.00. Both companies can sell their bar for $1.10 in the market. Company A can invest more in advertising, and sell more of its product. Company A can then take advantage of economy of scale, and manufacture the bar for less.

    To compete, Company B has to either 1) improve the efficiency of its marketing, or 2) improve its total business processes. Say it improves its manufacturing so that it produces the bar for $0.90 (same as company A). Now both companies are competing soley on marketing ability. They will both work to improve their efficiency of their marketing message, and its delivery. Ultimately, as a result of this competition prices will fall (or prices may stay the same, but benefits will rise).

    Look at cars: Due to competition (and heavy advertising of benefits) the features you can get on a cheap car now include air conditioning, lots of gadgets and a host of saftey features.

    You have a paradox in your post: How can all those irrelevant ads save me time? The point is that you judge them to be irrelevant very quickly. I am pretty sure that you only check the first few Adsense ads on a page, and ignore the rest.

    To paraphrase Winston Churchill: Advertising is the worst form of gaining attention…except for every other form that’s been tried.

  25. [...] Thanks to everyone in the blogosphere that has been paying attention to our pre-launch ideas (especially the great posts and commentary by Brian Smith, Garrett French, Ed Batista and Scott Karp).  The blogosphere really helps level the playing field and allows interesting ideas to percolate to the surface regardless of whether those ideas come from Silicon Valley or Madison Wisconsin.  And if you need additional evidence as to how blogs are changing things, check out this post from Adam Trachtenberg, an eBay technical evangelist who apparently overheard Brian and I talking about Jellyfish at the San Francisco airport late last night.  Thanks for the link to Jellyfish Adam!  You can’t make this stuff up. [...]

  26. [...] Thanks to everyone in the blogosphere that has been paying attention to our pre-launch ideas (especially the great posts and commentary by Brian Smith, Garrett French, Ed Batista and Scott Karp).  The blogosphere really helps level the playing field and allows interesting ideas to percolate to the surface regardless of whether those ideas come from Silicon Valley or Madison Wisconsin.  And if you need additional evidence as to how blogs are changing things, check out this post from Adam Trachtenberg, an eBay technical evangelist who apparently overheard Brian and I talking about Jellyfish at the San Francisco airport late last night.  Thanks for the link to Jellyfish Adam!  You can’t make this stuff up. [...]

  27. Newbie copies the Formula And Makes $62,948 In His First Month!

Add Your Comment

Subscribe

Receive new posts by email